Category: VC
April 27, 2020 Tech Crunch : Indie.vc founder Bryce Roberts: Profitability is ‘more achievable than a Series A round’
“Genuinely, it’s not rocket science,” he says. “Profitability isn’t this crazy, elusive thing. It’s literally more achievable thana Series A round. It’s way more achievable than a Series B round. If you look at the kind of fall-off between those rounds, most entrepreneurs would be better off finding their path to profitability and scale.” (read more…)
CATEGORY: capital, profitability, VC
April 23, 2020 Tech Crunch : How Deal Terms Are Changing Right Now
Meanwhile, the company that was doing so-so is being asked to accept less relaxed arrangements. Among these is taking a lower valuation or, if the company want to avoid one of these down rounds, providing more stock warrants to its investors — contractual rights that enable the investors to increase their position in the future at today’s lower price. Colla says he’s also seeing more companies in this second camp being asked to onerous terms on a more temporary basis, including year-long full-ratchet clauses that ensure that an investor’s shares aren’t diluted in later rounds if the valuation of a company drops. As for the third camp, it’s toast, he suggests. (read more…)
CATEGORY: downturn, valuation, VC
April 9, 2020 The Information : VCs Could Exhaust ‘Dry Powder’ in a Year Unless They Slow Investing
“There’s unfortunately a fear that’s settling into the entrepreneurial community that everyone is running out of money,” said Sakoda, a longtime venture capitalist whose firm, Decibel, is backed by networking giant Cisco Systems. “There are companies that have 18 months of runway that are wondering whether they are going to make it, solely because they think there might not be another venture capitalist on the other side of this.” (read more…)
April 7, 2020 Azeem Azhar : For Startups, Relevance Matters
And in the bottom right will be a large number of firms whose flourishing was predicated on an open venture capital market and on consumers and businesses behaving the way they did over the past five years. Their raison d’etre may have been whacked by Covid. They may be betting on the bounce after the epidemic to simply delay their plans, startup turntablism. That is quite some bet. (read more…)
April 6, 2020 Madison Wright via Medium : Company Building and Venture Investing in a Downturn
Most asset classes struggle during economic downturns, but the impact is far more nuanced than that. Private markets have proven resilient as the venture, private equity and startup lifecycle are long term, and as such, downturns tend to be more of a short term consideration. It is during these times that the perception of the illiquidity of private markets shifts from a disadvantage to a feature. That being said, certain effects will be felt more acutely, such as revenue decline, supply chain disruptions (in the case of the virus), and lengthened fundraising duration (read more…)
CATEGORY: downturn, resilience, VC
April 1, 2020 New York Times : Start-Ups Are Pummeled in the ‘Great Unwinding’
Bill Gurley, an investor at the venture capital firm Benchmark, said that over the past 10 years of the start-up boom, investors had taken on more and more risk. That has changed, leaving many of the riskiest start-ups exposed. “‘Risk on’ happens slowly,” he said. “‘Risk off’ happens overnight.” (read more…)
March 19, 2020 Tech Crunch : When the ‘dry powder’ disappears
With record amounts of venture capital raised, a market peak, and now a sudden plunge, the moment feels very much like it did in the spring of 2000 when the high-flying market, rife with young internet companies, abruptly nose-dived, wiping out thousands of startups — and hundreds of venture firms — over the following three years. At least some lessons were learned in the aftermath of that earlier crash. For one thing, says Rupp, in these “unprecedented times, people will show their character. You get a sense of who people are and how they think about the world, and GPs need to be really mindful of that and of how supportive they are in communicating with their portfolio companies.” (read more…)
CATEGORY: capital, resilience, VC
March 9, 2020 Tytchme : When Exits Go Wrong: The Trados Case Study
The Trados case is a rare window into how VCs manage their portfolio companies when things don’t go as planned. Although the company’s revenues doubled between 2000 and 2005, this was not enough growth for VCs to make significant money on their investment. A sale was deemed a better route to move on and spend their precious time on other deals. Thanks to their sale rights and liquidation preference, investors could time an exit that would not hurt them too badly. (read more…)
CATEGORY: growth, valuation, VC
March 1, 2020 Imad El Fay via Medium : Why more money leads to more problems in consumer startups
As VCs flooded the D2C space, they started throwing money at founders, granting them the valuations they asked for, however setting targets/ expectations, which almost always linked back to growth. As a result, D2C founders found themselves chasing growth at all costs, which meant spending most of their cash on Facebook and Google ads. The increased competition for marketing space on these platforms spiked CPMs, which further increased customer acquisition costs and deteriorated unit economics for these companies. (read more…)
February 13, 2020 Tech Crunch : Portfolio bloat: What’s happening to thousands of startups going nowhere fast
Ravi Viswanathan of the venture firm NewView Capital sums up what’s happening out there this way: “Firms and funds are generally coming back to market faster with bigger funds, and they’e investing a lot more, so you’re seeing portfolio bloat across the industry. But [limited partners, the outfits and people supplying money to venture funds] are investing for you to make money, and that means spending time on the needle movers.” (read more…)
CATEGORY: capital, customer acquisition, valuation, VC